Key Takeaways
- • UBS is packaging its stakes in eight private credit funds into $500 million of debt, a structure that would let the bank exit those positions without selling them directly, according to people with knowledge of the transaction.
- • An insurer has been hired to guarantee $375 million of the securities against default, a relatively unusual step in this type of deal.
- • UBS is targeting an investment-grade rating of A2 from Moody's Ratings on the insured portion of the transaction, per the people familiar with the matter.
- • The deal is being run through UBS's money-management arm, Unified Global Alternatives.
Summary
UBS Group AG is packaging its stakes in eight private credit funds into debt backed by an insurance company, a financial maneuver that would allow the Swiss bank to cash out of the positions without having to sell them outright, according to Bloomberg. The transaction is being structured by the bank's money-management arm, Unified Global Alternatives.
According to people with knowledge of the transaction, who declined to be identified because they were discussing confidential information, Unified Global Alternatives plans to sell $500 million of the securities. To support the offering, the unit has taken the relatively unusual step of hiring an insurer to guarantee $375 million of the securities against default.
The insured portion is being structured to achieve an investment-grade rating of A2 from Moody's Ratings, the people said. Securing that rating would be central to the marketability of the debt to investors seeking high-quality credit exposure backed by private credit assets.
The transaction highlights the growing use of structured credit and insurance wrappers to manage exposure to private credit holdings, an asset class that has drawn increased scrutiny and demand from institutional investors. Bloomberg's reporting did not specify the names of the eight funds, the insurer, or the pricing of the notes.
According to people with knowledge of the transaction, who declined to be identified because they were discussing confidential information, Unified Global Alternatives plans to sell $500 million of the securities. To support the offering, the unit has taken the relatively unusual step of hiring an insurer to guarantee $375 million of the securities against default.
The insured portion is being structured to achieve an investment-grade rating of A2 from Moody's Ratings, the people said. Securing that rating would be central to the marketability of the debt to investors seeking high-quality credit exposure backed by private credit assets.
The transaction highlights the growing use of structured credit and insurance wrappers to manage exposure to private credit holdings, an asset class that has drawn increased scrutiny and demand from institutional investors. Bloomberg's reporting did not specify the names of the eight funds, the insurer, or the pricing of the notes.
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